A Consumption Tax Would

question 20

Multiple Choice

A consumption tax would

• A)discourage saving because individuals would only pay taxes on income they spend.
• B)be progressive because everyone would be subject to the same tax system.
• C)be proportional because everyone would be subject to the same tax system.
• D)be progressive or regressive depending on the structure of the tax system.

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Definitions:

Courts Of Law

The institutions where justice is administered, disputes are resolved, and laws are interpreted and applied.

Coase Theorem

The Coase Theorem posits that if trade in an externality is possible and there are no transaction costs, bargaining will lead to an efficient outcome regardless of the initial allocation of property.

Externality Problems

Occurrences in which the production or consumption of goods and services imposes costs or benefits on third parties not involved in the transaction.

Government Intervention

The involvement by government in the market to influence the allocation of resources and distribution of income.